Series 79 practice questioneasyDue Diligence
What is the clearest red flag if management consistently explains misses as timing issues but cash collections keep weakening?
- AThe target automatically becomes an issuer of municipal securities
- BPurchase accounting no longer applies
- CReported earnings quality may be poor and revenue recognition may deserve deeper scrutiny✓ Correct answer
- DThe transaction cannot use a fairness opinion
Explanation
Why C — Reported earnings quality may be poor and revenue recognition may deserve deeper scrutiny
Reported earnings quality may be poor and revenue recognition may deserve deeper scrutiny When cash and earnings diverge repeatedly, bankers should question whether revenue and accrual assumptions are too aggressive. That is exactly the kind of pattern diligence is designed to test before a buyer signs.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 477+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Collection, Analysis & Evaluation of Data questions
- If the top customer accounts for 36% of target revenue, what is the clearest diligence implication?
- Which diligence workstream focuses on data privacy, system resilience, and breach history?
- If the top customer accounts for 43% of target revenue, what is the clearest diligence implication?
- What does a net working capital peg accomplish in a purchase agreement?